Comments about real estate, economy, and issues that affect my job as a Realtor.
Lately, of great importance is the display of the most important
PRE-CONSTRUCTION PROJECTS IN SOUTH FLORIDA.
My name is Henry B. Nathan
I am a realtor at United Realty Group.
My phone # is 954-296-6741

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Wednesday, December 24, 2008

BankUnited Financial Corp., the holding company for the largest bank based in Florida, expects to lose at least $327 million in the fourth quarter and warns of "substantial doubt" of its ability to operate as a going concern if it fails to raise capital.

In a notification of late filing with the Securities and Exchange Commission on Tuesday, the Coral Gables-based parent of BankUnited (NASDAQ: BKUNA) also acknowledged that the SEC’s Miami office began an informal inquiry into the company in October.

Bank United said it could not file its financial statements for the fiscal year ended Sept. 30 by Dec. 15, the SEC's usual 45-day window, because of adverse market conditions and an additional review of complex accounting and disclosure issues. That review is examining the company’s regulatory issues, liquidity and capital.

One discovery made by the bank is that it misclassified $449 million from securities sales as investing cash flows when they should have been classified as operating cash flows. The mistakes were made over a two-year period that ended Sept. 30, 2007.

The bank said it would restate its consolidated statement of cash flows if the mistake is determined to be a material event.

However, that accounting change would not impact cash, net income or earnings per share, the bank stated.

Bank United said it expects to file its annual report with the SEC sometime in January.

In a research note to clients Wednesday, Raymond James associate analyst Michael Rose said BankUnited appears to be in a "race against the clock in its efforts to survive." He maintained an underperform rating on its shares that encouraged investors to sell.

After signing a cease and desist agreement with the Office of Thrift Supervision in September, BankUnited has been working with federal regulators, who placed restrictions on its business practices and set a Dec. 31 deadline for the bank to raise its capital-to-asset ratios.

BankUnited, which previously said it was seeking $400 million, continues to seek more capital through an asset sale or an equity investment. The bank stated that if it does not raise the money by the end of the year, it doesn’t expect to meet the capital ratio requirement and could face “various enforcement actions regarding the bank” from federal regulators.

“We are in negotiations with a fund to raise capital and restructure our balance sheet,” BankUnited stated in the filing. “We cannot assure you that these negotiations will be successful. If such negotiations are not successful, there is substantial doubt about our ability to continue as a going concern.”

Philip van Doorn, senior banking analyst for The Street.com Ratings in Palm BeachGardens, said BankUnited faces significant challenges in raising capital. It would be unlikely to receive federal aid, and it is hard for a potential investor to evaluate the bank's finances when it's having difficulty preparing financial statements, he said.

"A potential acquirer looking to expand its deposit footprint into BankUnited's territory might find other opportunities to acquire one or more healthier institutions," van Doorn said. "The potential acquirer could also wait until BankUnited or another local institution fails, so they could scoop up deposits and branches on the cheap, without being forced to take on the failed institution's bad loans."

After losing $209 million over the first three quarters of its fiscal year, BankUnited's holding company said it expects a loss of $327 million in its fourth quarter ended Sept. 30. That loss would be greater than the $261.6 million loss its BankUnited savings and loan subsidiary reported to the Federal Deposit Insurance Corp. for that quarter.

However, BankUnited cautioned that the holding company’s loss could grow “substantially larger” when it completes an analysis of how much it should reserve for loan losses to cover its payment option adjustable-rate mortgage portfolio.

These types of loans, where borrowers can pay less than the monthly accrued interest and let the balance grow, were major factors in the downfall of Washington Mutual and Wachovia Corp. this year.

“If the final earnings analysis results in a material level of additional losses and we are unsuccessful in our negotiations with a fund to increase capital, there is substantial doubt about our ability to continue as a going concern,” Bank United stated in its filing.

Bank United’s liquidity improved, as it had cash and equivalents of $1.2 billion as of Sept. 30. The bank’s management stated it believed there are enough liquid assets to meet the potential demands of customers “in an environment where financial institutions have experienced unexpected withdrawal rates.”

However, the holding corporation has a potential liquidity issue after pumping $80 million into the bank during the fiscal year and the cease and desist order prohibiting it from taking dividends from the bank. As of Sept. 30, the holding company had $28.4 million in liquid assets against $5.3 million in annual administrative expenses and $16.2 million in corporate debt that can’t be deferred.

The Bank United holding company has sufficient liquid assets to meet its obligations for about 16 months, but it can’t be assured that it can make debt payments once those assets are depleted, the company stated.

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It seems like centuries ago, when I was called one day by a representative of Bank United who announced me that from that day on I wouldn't be able to send Bank United any more mortgage transactions.I was at that time working as a mortgage broker, doing what I could to work honestly in an environment that I didn't seem to understand very well.

Bank United needed at least a deal every month, in order to accept to work with me! (or was it three deals? I don't remember exactly)

My frustration didn't last more than a few minutes, though.

I had in my lenders portfolio hundreds of other banks competing for my small business. Thousands of programs, conventional programs, Alternate-A, A-minus programs, B-lenders, C-lenders, sub-prime, hard lenders, you name it. A dizzying array of ways to lend money to all sectors of society; good credit, fair credit, bad credit, zero-down-payment, foreign national buyers, refinance, jumbo loans, investor loans, each lender with hundreds of possibilities.

The new denominations given to these new categories, as I understand it now, were some of the gimmicks used by many lenders to label and package their mortgage loans for sale to US and international investors. (do you mean suckers?)I have been a bank manager in my youth. I thought I knew something about lending money to people and businesses. I have even studied this as a career.

I remember that there was a basic consideration when I was taught to underwrite, authorize or deny a loan: the borrower's capacity to repay the loan. Another element was the extent of the hard assets of the client, as well as the verification of the guarantees given by the borrower.

I guess the teachers of my generation didn't know anything about how to become a multimillionaire in a much easier way.

I wasn't a very successful mortgage broker during that period, I confess. It was the only time in my life when I wasn't one of the best at what I was doing.

Reading this kind of news is not a sweet revenge. Just a recollection.

Thursday, December 04, 2008

Just two or three years ago, some of the hot products that we could offer as affordable housing were these condo conversion communities, so popular in Miami and Broward counties. There seemed the best deals available; the developers provided assistance by offering office space to loan officers from mortgage companies and banks, so they could directly assist their buyers in securing the loans.

These were the happy times of the 100% financing, with developers assuming all closing costs, countless “incentives” such as paying off the first six months or the first year of condo maintenance fees, “upgrading” the converted condos with stainless steel appliances, redoing the floors, the cabinets, you name it.

The condo conversions are basically rental properties with a few or hundreds of apartments, which are bought by a developer. Going through legal procedures, making some required physical work on the property, would allow the investors to change the legal status of the rental community from one property to many independently owned “condominium units”.

Starting around 2000/2001, this was one of the hottest markets for builders and real estate investors. Properties bought at an average of $ 60,000 or $70,000 per unit, (this is just an example), would be sold at prices hovering in the $ 200,’s to $250’s and even more. Commissions paid to real estate agents were attractive and everybody seemed quite happy with the situation. Key elements were the organizations put together by the developers to market and sell their products, as well as the surprising complacency of the lenders.

Buyers seemed happy. Buyers signed the developers’ contracts with small deposits, which often left no room for mortgage contingency after 30 days. But in general, everything moved smoothly and new homeowners were happily occupying these units by the thousands. Everybody thought that it was a wonderful way of “accomplishing the American dream of homeownership”. This went on till about the end of 2006, dragging through the first months of 2007.

Fast forward to November 2008. I get a call from a prospective client who wants to be shown a condo she located on my website. I review the listing and find out that it is situated in a well-known condo conversion in Pembroke Pines , which name I remembered from the height of the “bubble”. In 2006, a two-bedroom unit at this community was selling at around $ 250,000.

The prospective buyer pointed out three more listings in the same complex.All four units are short sales or bank-owned foreclosures.I set up the showings and meet my client at the place.I notice immediately a profusion of signs on many units: mainly AUCTIONS posters, foreclosure notices, real estate “for sale” signs. It looked like almost everything there was for sale.I show the condos and in many of them, close to the back doors, small ant’s mounds were the sign of blight and abandon. Some of the units hadn’t been occupied for months, as evidenced by the state of carpets and bathrooms.

The area is convenient; the general condition of the buildings is good. So what’s wrong?

The actual asking prices varied between around $ 90,000 to $ 110,000. After talking to the listing agents, I have the impression that they hadn’t received too many offers and my feeling is that these places could go for as low or even less than $ 80,000.

That’s about a third of what they were selling a little more than two years ago. Unbelievable? Not quite. That’s the point.

Who can afford these modest $ 80,000 homes? Traditionally, and as per the criteria of Fannie Mae, somebody whose family income hovers in the monthly gross $3,000. (No more than 28% of the gross income can be dedicated to pay for the monthly mortgage, insurance, taxes)When they were valued at $ 250,000, this monthly income should have been in the $7,000. Otherwise, buyers could have been in trouble sooner or later. But nobody was paying attention, apparently

And this is the real problem.

People who can only afford $80,000 homes, living in $80,000 homes, but having to pay $250,000 mortgages.

Consequences? Many choose to run away. Not only because they feel cheated, but because they make just enough money to pay for an $80,000 home.

Did you get it yet?

Weird? As in most business transactions, when somebody loses, somebody else wins. Let’s analyze this.

The real winners:

- Investors, who purchased large rental properties and converted them to condos at the beginning of the “boom”, sold them very quickly, with high profits. Often after some basic improvements, and large amounts of paperwork, they would convert rentals previously valued at 60 or 80,000 dollars, into units that sold at $ 200,000 and more. These apartments were giving a fair return on their investments to their previous owners, who grabbed the chance to cash on the valuation of their property after many stagnant years.

In the second and third round of this “bubble”, things gradually changed. Developers started to increase their commissions to attract realtors, frantically arrange easy loans, and put together all kind of creative “incentives.”

Those developers who moved fast managed to sell out. The rest was stuck with a large percentage of their condos, and then their financing banks started to worry.The last phase was fairly recent: banks foreclosing on developers of dozens of properties, or at least on the high percentage of unsold units.

Of course that due to many different situations I cannot generalize and simplify. Many appraisers, realtors, mortgage brokers, banks were the beneficiaries while it lasted. They had cooperated with these savvy developers who made most of the profit.

The big losers?

- Those homeowners who had bought and walked away, leaving the bank to foreclose on their mortgages, experienced an irreparable damage to their credit that will compromise for a long time their ability to purchase again a home.- Real estate investors, who bought properties, hoping to get rich by “flipping” in the short term. Many of them let the banks foreclose. They have paid for some time the mortgage, the taxes, and the maintenance fees. At a certain point, they have given up.- The banks and mortgage lenders, of course, who will recover only a small percentage of their loans.- Fannie Mae, Freddie Mac and other GSE’s who bought these mortgages.- The buyers of all the bonds and other real-estate-related financial instruments; which could be foreign banks, a hedge fund, a sovereign-fund from an oil-rich country, or a Singapore investor.

Who is guilty?

A key element was the acceptance by lending institutions of unreasonable increases in appraisal values, which had no basis other than speculation.Nothing can explain that a home built 30 years ago increases 300% in value in a two-or-three-years period. Nothing can validate it.

Of course that the process fed on itself, causing inflationary building costs, but this was not at all sufficient to justify the incredible raise in the appraisals. Banks took the word of appraisers for granted, ignoring common sense. It was enough that two properties in the same neighborhood had sold at unusually and speculative high prices to allow an appraiser to use them in his “comparative analysis”. And from then on, every house in the area could automatically be the beneficiary of a new value based on this “analysis”, and so forth.

Banks would not object on the evident fallacy, and loans kept originating at a maddening pace. Buyers who had never saved a penny for a down payment, were granted homes they couldn’t afford, thanks to negative-amortization loans that would let them live in their new homes for a couple of years, until the inevitable happened. Naturally, mortgage brokers, lenders agents, everybody, would go along and perhaps encourage these appraisals. What about these “no-income-verification” loans? Did anybody doubt that they could sometime become the perfect instrument of deceit, fraud, and misrepresentation? Complicity? Collusion?

How many objections did we hear from Fannie and Freddie, the most expert institutions in the US on mortgage matter? How many voices of reason from Wachovia, Countrywide or Bank of America? Their executives were perhaps too busy showing their shareholders their prodigious short-term balance-sheet results, and cashing their even more prodigious bonuses, while ignoring the fundamentals.

It was a vicious and unending circle of madness, which results we are living now.

Thursday, November 13, 2008

In many previous posts, I have advocated for a scrutiny of our local governments.

Our property taxes have not decreased substantially, and have even increased sometimes, in spite of the crashing reductions of real estate values.

Our cities and counties tenaciously oppose every move in the sense of controlling their budgets. Property values go down? They raise their “millage” (tax percentage applied on the property value to determine the actual tax.) Tax reduction mandates? No problem, they start charging for previously free services, or increase their present fees.

If they were half as diligent in spending our money, as they are charging us, perhaps we could avoid these excesses.

I read this in the South Florida Business Journal – Nov. 11, 2008:

Wackenhut billings come under scrutiny in Broward

Broward County auditors are raising red flags over how county agencies kept tabs on nearly $6 million in billings by Wackenhut Corp. for security services last year.

In a report to be presented to county commissioners on Wednesday, county auditors noted several problems with the way Wackenhut invoices have been processed.

Specifically, the report noted that county personnel were not reviewing and validating daily entries on security logs that document hours worked by guards. The audit also found that there was no evidence that hours billed were hours actually worked.

County Auditor Evan A. Lukic said the decision to review the county’s oversight of Wackenhut grew out of news reports earlier this year that alleged the Palm Beach Gardens-based security company was overbilling Miami-Dade County for services that were not performed.

“We were concerned about the allegations we heard and whether we were possibly experiencing the same thing here,” he said. “We wanted to look at it from how are we controlling the contract and administering it.”

At this point in the auditing process, Lukic said, there was no evidence Wackenhut engaged in any wrongdoing. However, based on the audit’s findings Lukic said his department will take a closer look at payments to “make sure that guards who we are paying for are present.”

In June 2005, BrowardCounty entered into a three-year agreement with Wackenhut to provide security services. Payments for fiscal years 2005, 2006 and 2007 totaled more than $14.8 million.

In fiscal 2007, BrowardCounty’s Aviation Department topped the list with $2.1 million in security services billings by Wackenhut. The county’s facilities maintenance division paid out $1.66 million to Wackenhut, and the county’s library division was billed nearly $633,000.

The report found that during a one-week period, the libraries division paid 233 hours of overtime for security guards and found no evidence that Wackenhut provided the required written notification and payroll documentation to substantiate the overtime payments.

When queried by the South Florida Business Journal about the auditor's findings, Wackenhut issued the following statement: "We've worked closely with facilities management through the audit department to insure compliance and to improve our processes."

Questions also have been raised about matching guard qualifications to pay rates. In some instances, the audit raised concerns about guards with lesser qualifications billing at a higher rate, resulting in overcharges.

In an Aug. 22 letter, Broward’s director of the facilities maintenance division advised Wackenhut President Drew Levine that he would now require the company to provide documentation that links guards’ qualifications with their job classifications.

In the meantime, Lukic is asking the Broward County Commission to direct the county administrator to come up with procedures to ensure that billings are validated, that the guards’ qualifications match their job descriptions and that overtime charges are substantiated.

In May, a Miami-Dade County audit found that Wackenhut overbilled the county by as much as $6 million over three years for services it did not provide to Miami-Dade Transit, and then falsified records to cover up the over charges.

In its response to that audit, which Wackenhut published on its Web site, the company said it has cooperated with the county’s investigation, but “continues to question the audit methodology.”

Wackenhut said a lawsuit by a former guard, who accused the company of padding its bills, has caused the increased scrutiny.

“It is Wackenhut’s belief that county entities … have been placed under undue pressure and influence by unsubstantiated allegations in this ongoing disputed litigation,” it stated.

Miami-Dade continues to review Wackenhut’s response to determine what actions should be taken, county spokeswoman Suzy Trutie said.

***********

My opinion:

Wackenhut has the audacity of "questioning" the “audit methodology”. Am I understanding this? Of course not. Am I agreeing to this? Of course not. Do I believe the hypocritical “findings” of the Miami-Dade and BrowardCounty authorities three years after the facts? No way. Now that the money has been spent, they "discover" that the services they paid for were not even provided. And we are talking millions of dollars. What about all these people we are paying to take care of our money? Good question.

By the way, how many millions will this Marlins stadium cost the tax payer? Was it 800 million, 700, 900, a billion? God knows. And we will know in a few years, after the bills are paid and we find again ourselves in a big hole. But don’t worry, they will find a way of raising money to cover it all. Your money. And my money too; subsidizing a business, which market value will increase exponentially after they get their free stadium.

, Terraces of Turnberry boasts a long list of luxury amenities and luxurious residential features. Inside the guarded grand entry gates, you fill find a state of the art health club and spa. Its facilities include an outdoor heated swimming pool with an poolside grill, a fully equipped gym and fitness center, sauna and steam rooms, and outdoor tennis and racquetball courts. Within the Terrace tower, residents can enjoy a piano room and a social lounge as well as an on site convenience store.

A wonderful architectural accomplishment, the Terraces at Turnberry feature sleek, oversized terraces extending prominently out of the units for the best viewson the Intracoastal Waterway. Recent renovations has kept this buildingas one of

the most coveted condobuildings in Aventura. The state of the art health club and spa are some of the best equipped we have seen. Outdoor sports, such as tennis and racquetballs, wonderful piano room and lounge, an onsite convenience store, add to the great features of the Terraces.

The amenities include:

Tennis Courts

Racquetball Court

Pool

Spa

FitnessCenter

Club House

Concierge

BusinessCenter

Restaurant

Storage facitlities

24 hour security.

Aventura has become one of the most famous destinations in South Florida, with easy access to beaches, word-class shopping at the Aventura Mall, beautiful parks, excellent public and private schools. Conveniently close to both Miami and Fort LauderdaleAirports, with many houses of worship, restaurants, clubs, the new casino Gulfstreamracetrack and a short drive to the shopping and entertainment atBalHarbour and Hollywood.

If you are looking for a condo in the Aventura area, we at www.condo-southflorida.com can assist you andhelp you find the home, vacation home or investment property, that you are searching for. Our great experience in South Florida Real Estate and our friendly attention will make all the difference

Monday, November 03, 2008

At the dawn of a new presidential term, and with no intentions of venting out my political preferences, I find it important to spread around interesting ideas which can help explain what has gone wrong in our country and our economy and what new directions are being suggested to rebuild our nation’s wealth and success and regain our position as world leaders.

A provocative book that have drawn my attention is:

The PredatorState:

How Conservatives Abandoned the Free Market and Why Liberals Should Too.

By James K. Galbraith.

Without endorsing its contents ( I am far from being an economist) I found some answers to the agonizing questions of how to save capitalism and a free society after the cataclysmic events that threatens to throw us back to depression-like poverty and hardship.

Here is a synopsis of The Predator State:

The cult of the free market has dominated economic policy-talk since the Reagan revolution of nearly thirty years ago. Tax cuts and small government, monetarism, balanced budgets, deregulation, and free trade are the core elements of this dogma, a dogma so successful that even many liberals accept it. But a funny thing happened on the bridge to the twenty-first century. While liberals continue to bow before the free-market altar, conservatives in the style of George W. Bush have abandoned it altogether. That is why principled conservatives -- the Reagan true believers -- long ago abandoned Bush.

Enter James K. Galbraith, the iconoclastic economist. In this riveting book, Galbraith first dissects the stale remains of Reaganism and shows how Bush and company had no choice except to dump them into the trash. He then explores the true nature of the Bush regime: a "corporate republic," bringing the methods and mentality of big business to public life; a coalition of lobbies, doing the bidding of clients in the oil, mining, military, pharmaceutical, agribusiness, insurance, and media industries; and a predator state, intent not on reducing government but rather on diverting public cash into private hands. In plain English, the Republican Party has been hijacked by political leaders who long since stopped caring if reality conformed to their message.

Galbraith follows with an impertinent question: if conservatives no longer take free markets seriously, why should liberals? Why keep liberal thought in the straitjacket of pay-as-you-go, of assigning inflation control to the Federal Reserve, of attempting to "make markets work"? Why not build a new economic policy based on what is really happening in this country?

The real economy is not a free-market economy. It is a complex combination of private and public institutions, including Social Security, Medicare and Medicaid, higher education, the housing finance system, and a vast federal research establishment. The real problems and challenges -- inequality, climate change, the infrastructure deficit, the subprime crisis, and the future of the dollar -- are problems that cannot be solved by incantations about the market. They will be solved only with planning, with standards and other policies that transcend and even transform markets.

A timely, provocative work whose message will endure beyond this election season, The Predator State will appeal to the broad audience of thoughtful Americans who wish to understand the forces at work in our economy and culture and who seek to live in a nation that is both prosperous and progressive.

The cult of the free market has dominated economic policy-talk since the Reagan revolution of nearly thirty years ago. Tax cuts and small government, monetarism, balanced budgets, deregulation, and free trade are the core elements of this dogma, a dogma so successful that even many liberals accept it. But a funny thing happened on the bridge to the twenty-first century. While liberals continue to bow before the free-market altar, conservatives in the style of George W. Bush have abandoned it altogether. That is why principled conservatives -- the Reagan true believers -- long ago abandoned Bush.

Enter James K. Galbraith, the iconoclastic economist. In this riveting book, Galbraith first dissects the stale remains of Reaganism and shows how Bush and company had no choice except to dump them into the trash. He then explores the true nature of the Bush regime: a "corporate republic," bringing the methods and mentality of big business to public life; a coalition of lobbies, doing the bidding of clients in the oil, mining, military, pharmaceutical, agribusiness, insurance, and media industries; and a predator state, intent not on reducing government but rather on diverting public cash into private hands. In plain English, the Republican Party has been hijacked by political leaders who long since stopped caring if reality conformed to their message.

Galbraith follows with an impertinent question: if conservatives no longer take free markets seriously, why should liberals? Why keep liberal thought in the straitjacket of pay-as-you-go, of assigning inflation control to the Federal Reserve, of attempting to "make markets work"? Why not build a new economic policy based on what is really happening in this country?

The real economy is not a free-market economy. It is a complex combination of private and public institutions, including Social Security, Medicare and Medicaid, higher education, the housing finance system, and a vast federal research establishment. The real problems and challenges -- inequality, climate change, the infrastructure deficit, the subprime crisis, and the future of the dollar -- are problems that cannot be solved by incantations about the market. They will be solved only with planning, with standards and other policies that transcend and even transform markets.

A timely, provocative work whose message will endure beyond this election season, The Predator State will appeal to the broad audience of thoughtful Americans who wish to understand the forces at work in our economy and culture and who seek to live in a nation that is both prosperous and progressive.

At the Southern end of Miami Beach, a section about 25 blocks long, stretches alongside the ocean. In less than 20 years it has undertaken an incredible change from a long row of run-down hotels, mostly occupied by retirees, to one of the best known world tourist destination.

Hundreds of nightclubs, restaurants, hotels, luxurious residences are the constant playground of top jet-set, sports, fashion, cinema and arts personalities.

The white sand of SouthBeach is a special mix of local tradition and world-class boutiques, stores, where the eccentric meets the bohemian, long haired northern beauties alternate with gorgeous stylish Latinas. At night, the local crowd and international tourists dressed up in varieties of luxurious and informal casual attires will stroll along Ocean Drive and Lincoln Road. Exotic cars, traffic jams, noise, music are only part of the fun.

SouthBeach hosts a variety of cultural, art and exhibition events. The Convention Center, The New World Symphony, Concerts at different clubs, Museums and Galleries, can keep you busy every day of the year.

Of course, the best way to enjoy SouthBeach could be just to walk, or rent a bike or scooter, or just enjoy the lights, the breeze and the beautiful people.

When looking to buy or rent a Condo in SouthBeach please check our CONDO SEARCH where you can review all listings in most of the Condominium buildings in SouthBeach.

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If you would like to search the listings of condos for sale at Icon South Beach,

Saturday, October 18, 2008

Bank have in general the standard of never allowing more than a 5% to be split between the two brokers involved - listing broker and buyer broker.

However I have seen cases where only 1% was offered.

In most cases, the listing states that commissions are not guaranteed, which in plain English could mean that the bank can pay the brokers whatever they want at the moment of the closing.

In effect, in real life, when the broker has presented a customer to a seller (in this case the bank), he will not be able to back up if a deal is agreed upon, where the bank offers a very low commission.

I have seen one case of a deal where the bank offered $ 1,000 flat in a $ 200,000 listing.

It could sound enough. But it does not when you realize that most realtors do a few sales every year, after hard work, hundreds of showings and uncountable calls and "busted deals".

Saturday, October 11, 2008

For the last couple of years or so, the new terms “short-sale”, “pre-foreclosure”, “bank-owned” have become very familiar to any active realtor.

Yes, there are courses and classes and conferences to make us aware of the opportunities of this new sector in real estate. And I am continuously receiving emails offering leads on foreclosures and short sales and “BPO’s”.

I have been involved in a few short sales and I even lend occasionally advice to people who ask me what I know about the subject. The fact is that there is not so much to explain about it. It’s just a logical way that a lender can use to handle bad or problem-loans and cut its losses.

So far so good. However, every time I get involved in a short sale or “pre-foreclosure” deal, the bizarre takes over the rational, and weirdness supersedes common sense. Let me explain why I think so:

1) There are some conventions in how we usually handle a real estate sale in the US. Usually we list a property when a seller designates us as his “listing agent” and we place it on the MLS. There are some requisites to do that. He must give us an exclusive right of sale; otherwise we wouldn’t put it on the system.

2) If we have a buyer looking for a property, we will search on the MLS system and establish a relationship with its “listing agent” by asking to show it to our buyer, or requesting additional information.

3) Once an offer is made, an answer is received within a short term, usually 2 or 3 days. It can be an acceptance, a counteroffer, or a rejection. A non-reply within the given term is considered a negative answer.Now let’s compare this to what a bank involved in a short sale, or foreclosure sale usually does:

A) After talking to his bank, the seller of the troubled property agrees with a real estate agent to list his condo for sale in the MLS. The agent will place a special clause in the listing, stating its special status as a short sale and its contingency to a bank’s approval.

B) When an offer is received, the bank sometimes requires that it must be accompanied by a loan approval or a proof of funding if it’s a cash offer.

C) The buyer’s agent will often find a clause in the listing, stating that no commission is guaranteed. It is known that banks do not like to pay co-operating brokers more than a 2.5% compared to the usual 3%, but even this is not guaranteed. You must accept whatever the bank will definitely wants to pay you. No discussion.

Do you think that this is the perfect way for the banks to attract the best and most motivated realtors? Work double for less money?Usually, in a buyers' market, a smart seller often increases the commission, so buyers’ agents are motivated to give him some priority. But apparently, banks have discovered that they can dictate their conditions, nickel-and-dime us so that they can save a few pennies after sinking billions of dollars in dubious transactions. Naming a listing agent who lives 200 miles away from the property isn't the smartest move either.But let's not discuss their marketing skills.They must know what they are doing.

D) When an offer is presented, the bank does not answer within any agreed period.

E) First difference: the listing agent does not remove the property from the MLS.

F) Second difference: the bank can take many months to reply. Meanwhile other offers are frequently received and presented to the bank by the listing agent. The process gradually resembles an auction and the higher bidder might get finally an answer. Or not.

G) Third difference. When a buyer’s agent contacts a bank-owned or foreclosure sale, and even some short sales, we often observe that the same agent or broker has his name on a lot of listings. This agent is sometimes based in a location that is distant from the property. I have seen brokers in Tampa handling listings in Miami. Do these guys have some special connection with the bank? What is the criteria of the banks when they choose their listing brokers?

Frankly, I don’t get any calls from any bank offering me listing business. And I have called a few of these “loss-mitigation” departments! I haven't seen many of the best agents in my area involved in this kind of transactions, either.

H) Fourth difference: Frequently, many of these listing agents don’t even bother to show the property. They designate a “showing company” to take the buyer’s agent call and arrange a showing, usually by means of a lock-box key.The “showing company” does not usually provide information about the property.So much for great sales techniques, indeed.

I) Fifth difference: these listing agents very often do not respond at all to phone calls or emails. Perhaps because of the sheer amount of listings they carry, or because they are just disgusted by the whole process. It was transparent to me in some of the cases where I was involved that these listing agents didn’t care too much. In all truth, it looked like nobody cared, except me and the buyer. Some business must result though, and I am not trying to mock or belittle those agents; it's just the whole system that looks so unprofessional.

K) In the case of a short sale, the listed price doesn’t mean too much. It can be very low to attract offers. The listing can sometimes falsely indicate that the price was “approved by the bank”. Correct me if I am wrong but It often bears the mark of “bait and switch”.

L) Now let us study the short-sale transaction from the seller’s point of view: he has possibly initiated the case providing the information required by the bank, often with the assistance of the real estate agent who will list it on the MLS.

M) The seller starts calling the bank. He will get all kind of conflictive information. A different employee will respond to his call every time and everybody looks completely disconnected from what has been done so far. They hang up promising him to call him back the next day, which of course never happens. In many cases, when the seller asks to know what is the exact pay-off of his mortgage, he can get different amounts every time.

N) The seller often gets simultaneous calls from the bank, threatening foreclosure. He sometimes tries to explain that there is a short sales procedure going on. But in spite of having spoken to dozens of bank employees, nobody seems to have any idea of what has been done the day before.

Does this look like a comedy? You bet.

Everybody chasing his own tail in a mad dance. That’s what it looks like.

They are the reason I lost a couple of possible sales, and gained the frustration of a few good buyers with cash in hand. I now try to discourage my clients of getting involved in this joke. Am I wrong? Maybe.

But if these banks expect to get out of this mess, they’d better get their act together.

It would be funny if it didn't look very suspicious. The background of the bank crisis makes this case quite eye-opening. It illustrates some of the incredible things that are happening in the real estate and mortgage markets, while our government is embarking on the largest bailout in history.

I am a licensed Florida realtor. In July 2008, one of my clients called me to place an offer on a condo listed in the MLS by another realtor. Located in Hollywood, it was listed for sale at $238,000.

I called the listing agent and he informed me that it was a SHORT SALE, which, as you know, means that the mortgage lender is willing to take a loss. Some time ago, the bank had refused an offer for $ 250,000 but, after a few months, the situation had deteriorated so much that they had lowered their price and would be very open to negotiations.

At the request of my customer, I put immediately presented an offer of $199,000 CASH, with no contingency, which was transmitted to the bank by the listing agent. As required, we provided the bank with the proof of liquid funds that my clients had ready to close.

I did not hear from the bank. I periodically checked with the listing agent who had the contact with the bank. He kept telling me that the bank was silent and had not replied yet.He told me a couple of times that our offer was the only one and that he hoped that the deal would go through.

About a week ago, I called him again. This time the news was different. The listing agent told me that the bank had foreclosed on the property. Then, the bank gave it to another realtor for sale and it was placed on the Realtors MLS system. Very quickly, the bank got some offers and signed a contract to sell it for $155,000.

I called the new listing agent who is selling the foreclosed condo.He tried to explain that what looked funny was "usual" since banks have 2 separate divisions, one for foreclosures and the second for short sales, and that they don't act in a coordinate manner. I don't buy into this foolishness. I am sure that a simple note in the file would have made clear to anybody involved in the bank that there was a solid cash offer for $199,000.

The bottom line is that there is no reason why a bank can foreclose on a property where they had an offer to sell for $199,000 and instantly list it (after foreclosure) and sell it for $155,000. That evidently would increase the loss of the bank by $44,000 plus the usual foreclosure expenses. That is an additional loss of about 22%

Later on, I had a conversation with the listing agent who had handled my short-sale offer and he was evidently distressed since he had worked with the seller for a long time, getting offers for up to $250,000 which were systematically ignored or refused by the lender. The outstanding debt was apparently of about $ 288,000. That meant a loss of a little more than 10% on the loan. The bank ended up taking an almost 50% loss. This is one of the major banks. It might be a peanuts case, compared to the hundred of billions these big banks are holding in their portfolios, but still a significant example.

The seller had apparently tried to save his property from foreclosure by selling another apartment, and keep paying his mortgage. But, later on, he opted to put it in short sale hoping to minimize the loan default and salvage his credit.

The realtor told me that after this experience he was considering retiring from this business.

This is not about the loss of a commission by me and the other agent.Frankly speaking, the point is that this smells very "fishy".

The whole situation could only be one of two things. Complete stupidity, or fraud. Actually I wouldn't worry too much about a bank mishandling their business. But at this point, our whole banking system is being "bailed out" with taxpayers' money and we have the right to know.

Traditionally, there was a fairly transparent way of conducting sales and purchases of real estate. Lately, a very different environment is encountered by many professionals, and some of us fear that, even when people are losing their homes and our whole economy is deeply troubled, some persons or organizations could be involved in unscrupulous dealings.

Although I am not making any accusation, this case is, in my opinion, very strange. Of course, there is also the strong possibility that it's just one more instance of the banking mess, and that this is a case of plain bureaucratic stupidity.

Will our money be used to bail out this kind of businesses?

October 11th, 2008

Henry B. Nathan is a Realtor in South Florida. Please visit my website and search of the top real estate database. Great Search Tools will make your search enjoyable and successful. http://www.condo-southflorida.com

Henry B. Nathan is a Realtor in South Florida. Please visit my website and search of the top real estate database. Great Search Tools will make your search enjoyable and successful. http://www.condo-southflorida.com

Thursday, October 02, 2008

I got the news that Davie’s Town Council has postponed a proposed ordinance on billing drivers involved in accidents, to cover the cost of police and fire-rescue.

The proposed fee is of about $ 940 per incident, including the cost of an independent contractor acting as the collection agency.

A decision on the subject is expected in two weeks.

The general outrage might have caused the delay.

I take it as a sign of our cities’ rebellion against their citizens’ decision to limit their unbridled spending. The modest reductions in property taxes gained so far by legislature rulings and constitutional amendments are gradually being upset by new charges and fees for services that are included in the normal function of our government and have always been covered by the taxes collected.

This kind of sneaky double-taxation has been going on for a while. But this new one is just too much.

Congratulation to Michael Mayo, whose article I just read in today’s Sun Sentinel.

Or how about expedited fire response fees? A cool grand if you want a pumper truck to douse those flames within 10 minutes. Water, of course, would be extra.

Or how about public-meeting speaking fees? Something like $20 a minute. Hey, free speech is still free, but those microphones and cameras for your town's webcasts cost money.

Pardon my dripping sarcasm, but I'm ticked about this Davie plan, which got a thumbs-up on first reading last month and will be back on the Council agenda Oct. 15 after being tabled on Wednesday.

It's basically a city money grab on insurance companies by a third-party vendor, the Cost Recovery Corporation of Dayton, Ohio. According to CRC president Regina Moore, the company would get roughly 10 percent of the amount billed. The city would get the rest.

The proposed contract calls for at-fault drivers in accidents to pay for everything from the number of cops to the type of fire-rescue equipment called out to the scene.

It would even bill for the amount of time a police officer had to spend in court testifying as a witness ($80 an hour, according to the company's fee schedule).

According to the proposed ordinance, when "a no-fault declaration is made, the fee imposed may be proportionately charged to all drivers involved."

Ouch.

The fees would be billed to nonresidents and residents alike. Call me naive and hopelessly old-fashioned, but I always thought some municipal services were part of the civic compact, paid by tax dollars. Things like emergency rescue and police response to wrecks.

Welcome to government as user-fee capitalism, where a price will be put on everything.

"Where does it end?" Davie Mayor Tom Truex said Wednesday. At first, Truex supported a limited recovery fee plan for major accidents on major highways that run through Davie, like Interstate 595. But he opposes the broader plan.

"It's not a crash recovery fee," he said. "It's an accident tax."

Moore said the concept has been successful in many cities, encouraging safer driving and leading to a reduction in accidents.

Or maybe it just leads to an increase in unreported minor accidents.

She insisted that wasn't the case. She also insisted it wouldn't lead to hit-and-runs. She must not know South Florida very well.

A 2006 policy brief by the National Association of Mutual Insurance Companies called the fee "a form of double taxation" and criticized CRC for "employing aggressive and threatening tactics" to collect fees.

"Simply untrue," Moore said.

Moore said those responsible for accidents should pay for costly services they require. So why not charge swimmers who get caught in riptides for lifeguards?

"You're taking it to a complete extreme," she said.

No, that's taking this to its logical conclusion.

Don't like the direction things are headed? Write your local elected officials.

But if you want them to read your thoughts, that might be a $10 bifocal maintenance fee, please.

Tuesday, September 30, 2008

A key source of employment in Florida, housing construction, sales, financing and maintenance are major components of our economy. Property taxes have increased well above the official inflation rates during the last two or three decades.

Thousands of new homes and condos in every location have surely tremendously broadened the taxable base of most cities in South Florida. That has not been enough to feed the appetite of voracious cities and counties.

A couple of lukewarm regulations by our Florida congressmen have aimed to ease homeowners’ pains, as well as an amendment recently approved to increase the homestead exemption amount.Our taxes are calculated on the assessed value of each property, which is determined by the county property appraiser’s office, multiplied by the “millage” which is determined by the local governments.

While our legislators have focused on reducing the assessed values, local governments are starting to defeat this purpose by increasing their millage, which is what was to expect, and I wrote about it a long time ago.

However, the flood of new service charges that many cities are implementing is starting to look more and more as double taxation. Charging us for services traditionally covered by our property taxes is the new plague that relentless local authorities are uncovering. I wouldn’t be surprised if the cop handing you a ticket for a traffic violation could include an additional bill for his “services” with a "thank you for your business" remark, or if a local library could charge you a “shipping and handling” fee every time you pick a book.

Here is an example of this kind of creativity. The city of Davie is today's winner. Read this article from the Sun Sentinel.

By Susannah Bryan-South Florida Sun-Sentinel -September 30, 2008

Accident response fees are so controversial that five states — Georgia, Indiana, Missouri, Pennsylvania and Tennessee — have passed laws to ban them.

Yet Davie on Wednesday is set to give final approval to a measure that would bill at-fault residents and out-of-towners an estimated $840 for costs associated with responding to car accidents. If it can't be determined who is at fault, all parties would be billed.

"It is a cost recovery fee for people who are creating havoc on our highways," Councilwoman Susan Starkey said on Monday.

If approved, Davie would become the first municipality in South Florida to charge such a fee. The town tentatively approved it 3-2 on Sept. 17, with council members Michael Crowley, Marlon Luis and Susan Starkey supporting it. Mayor Tom Truex and Councilman Bryan Caletka rejected it.

As Davie moves ahead, insurance companies are working to persuade Florida to ban such fees. They argue the fee will raise insurance rates and is really a hidden tax.

"We have been trying hard to fight back," saidWilliam Stander, assistant vice president of Property Casualty Insurers Association of America, a trade group that represents more than 1,000 companies nationwide. "The idea that you should have to pay for police and fire services, it's offensive."

Insurers lobbied five states to ban the accident fee and each agreed because of concerns over double taxation.

State Rep. Martin Kiar, D-Davie, said the issue may come up in Florida this legislative session.

"People are having such a tough time making ends meet," Kiar said. "For the cities to impose another fee, it's just not fair to our people."

On July 28, Pembroke Pines commissioners voted against a similar fee, citing concerns it would expose the city to costly legal challenges. Officials in Plantation, Miramar and Southwest Ranches, who had briefly considered the idea, say they have dropped it.

If approved, Davie would hire Dayton, Ohio-based Cost Recovery Corp. to bill insurers. If they don't pay, nonresidents would get a bill but residents would not.

Supporters argue that Davie responds to more accidents than other cities because it is surrounded by Interstates 95, 595, 75 and Florida's Turnpike. As proposed, the fee would apply to accidents on highways and local roads that require emergency response, including those outside town.

Critics say the fee may lead to a tit-for-tat mentality, with cash-strapped cities passing similar laws to raise money.

In July, Weston City Manager John Flint said his city would likely charge an accident fee to residents of cities who impose such a fee on Westonites. But on Monday, Mayor Eric Hersh said he opposes such a plan.

Faced with an $12.6 million shortfall, city commissioners on Wednesday eliminated about 74 positions, including 61 vacancies, and cut pool hours, among other measures. The city also imposed a four-day, 40-hour work week, to begin in October for some employees.

Commissioners approved a property tax rate of $4.43 per $1,000 of assessed property value for the 2008-9 fiscal year, up from the current rate of $4.17 per $1,000 of assessed property value. The commission on Sept. 12 also voted to increase the residential fire protection fee to $209.63 per home and condo, an increase from $153.48 this year.

I wrote about the tax-rate trick. Property assessment goes down, they raise tax rate, we lose.